It’s interesting that in the same week that a group of Australian craft brewers released a white paper calling for the Australian Government to look at excise relief for small brewers, a group of US Senators introduced a bill looking at the same issue. Though in saying it’s the same issue, the only similarity is that they are both tax issues.
If I had a dollar for every time I was asked why beer is so expensive in Australia, I could afford to give craft brewers some generous excise relief out of my own pocket. Looking at the relative tax structures that Australian and US brewers operate under goes a long way to explaining the difference. As this article in the Washington Post looking at the Bill explains, US brewers operate under a far more relaxed tax system…and even then they are asking for a reduction:
Currently, breweries producing less than 2 million barrels a year pay a reduced tax of $7 a barrel on the first 60,000 barrels they produce. The BEER Act would eliminate the tax for the first 15,000 barrels, and reduce it to $3.50 for barrels 15,001 to 60,000. Above that it would be $9 a barrel, half the current rate, for both small and large brewers.
To give you some perspective, 15,000 barrels (the rate at which beer would not be taxed) is roughly 1.75million litres of beer. The 60,000 barrels mark equates to roughly seven million litres. This would be somewhere roughly in the range that Little Creatures produces.
By contrast, I spoke with Warwick Little from Port Macquarie’s Little Brewing Company. Little Brewing can currently produce about 100,000 litres per annum. The excise payable on a 50 litre keg of their Pilsner is $60.10 at 5.0% abv. Excise payable on the same volume (50 litres) of the bottled version of the same beer equals $86.77 OR $13.74 per 7.92 litre carton.
Warwick notes that Australia is the only country in the world that differentiates between the keg and packaged beer with a different excise rate for each. He also notes that these rates are as of 1st February 2013 and they are due to go up again on 1st August 2013.
So, as 1 US barrel = 117.34 litres, there is 2.3468 50 litre Australian kegs to a US barrel. Warwick points out that using this factor of 2.3468, if we convert to US barrels our excise equivalent is $141.04 AUD per US barrel in kegs, and $203.65 AUD per US barrel for packaged beer. So, $3.50 per barrel compares to $203.65 for the tax on beer in bottles.
Now you know why our beer is so expensive.
Media Release – US Brewers Association
Senators Cardin and Collins Reintroduce
Small BREW Act in the Senate
Boulder, CO • May 10, 2013—Three months after the Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act) was reintroduced in the House of Representatives as H.R. 494, the Brewers Association (BA)—the not-for-profit trade group dedicated to promoting and protecting America’s small and independent craft brewers—announced the Senate version of the Small BREW Act, S. 917, was reintroduced by Senator Ben Cardin (D-Md.) and Senator Susan Collins (R-Me.).
The Small BREW Act seeks to recalibrate the federal beer excise tax that small brewers pay on every barrel of beer they produce, reflecting the evolution of the overall brewing industry. An earlier iteration of the bill, S. 534, was introduced in 2011 during the 112th Congress and enjoyed bi-partisan support.
Under current federal law, brewers making less than 2 million barrels annually pay $7 per barrel on the first 60,000 barrels they produce, and $18 per barrel on every barrel thereafter. The Small BREW Act seeks to recalibrate that rate so that the smallest brewers and brewpubs would pay $3.50 on the first 60,000 barrels. For production between 60,001 and 2 million barrels the rate would be $16.00 per barrel. Any brewer that exceeds 2 million barrels (about 1 percent of the U.S. beer market) would begin paying the full $18 rate. Breweries with an annual production of 6 million barrels or less would qualify for these tax rates.
“Small brewers have been anchors of local communities and America’s economy since the start of our history. In addition to making high-quality beers, craft brewers, including those in Maryland, create jobs and reinvest their profits back into their local economies,” said Senator Cardin, a member of the Senate Finance and Small Business committees. “The federal government needs to be investing in industries that invest in America and create real jobs here at home. With more than 2,400 small and independent breweries currently operating in the US, now is the time to take meaningful action to help them and our economy grow.”
“Maine is home to dozens of unique craft breweries and brewpubs that invigorate our economy by providing more than 1,000 jobs and drawing countless tourists into our state,” Senator Collins said. “In meeting with brewers across Maine, they always make clear to me how federal tax policy affects their businesses. This bill, which I support, would help reduce the tax burden placed on many small brewers across our country, allowing them to thrive, create jobs, and further grow our economy.”
Nationally, small and independent brewers employ over 108,000 full- and part-time employees, generate more than $3 billion in wages and benefits, and pay more than $2.3 billion in business, personal and consumption taxes. Adjusting the tax rate would provide small brewers with an additional $60 million per year. This money would be used to support significant long-term investment, job creation, and economic expansion by growing their businesses regionally or nationally.
“Small brewers nationwide appreciate the leadership from Senator Cardin and Senator Collins on this issue and their unwavering support of the craft brewing community,” added Bob Pease, chief operating officer, Brewers Association. “We look forward to working with them and their Senate colleagues on the passage of this legislation, which will undoubtedly benefit our economy in the near and long term.”
About the Brewers Association
The Brewers Association is the not-for-profit trade association dedicated to small and independent American brewers, their craft beers and the community of brewing enthusiasts. The Brewers Association (BA) represents more than 70 percent of the brewing industry, and its members make more than 99 percent of the beer brewed in the U.S. The BA organizes events including the World Beer Cup®, Great American Beer Festival®, Craft Brewers Conference & BrewExpo America®, SAVOR℠: An American Craft Beer & Food Experience and American Craft Beer Week®. The BA publishes The New Brewer magazine and its Brewers Publications division is the largest publisher of contemporary and relevant brewing literature for today’s craft brewers and homebrewers.
The Brewers Association is an equal opportunity employer and does not discriminate on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital/familial status. The BA complies with provisions of Executive Order 11246 and the rules, regulations, and relevant orders of the Secretary of Labor.